Today, a very long look at mortgage insurers graces the front page of the Wall Street Journal, and it finds out what we've already known for some time: that it's the mortgage insurers that are playing the role of final arbiters of credit in a fast-contracting mortgage lending market (at least the part of it not backed by the Federal Housing Administration). Way back on June 11, Linda Lowell penned a story for HW on the effect of the mortgage insurers, which included this little gem that is proving to be more than a little prescient:
MICA, the trade association representing the private mortgage insurance industry, began reporting rising volume monthly after February 2007. For example, mortgage insurers wrote 190 percent more business this year, through April, than in the comparable period of 2006, when subprime/Alt-A were in their heyday. To put that sort of gain into proper context, consider that even GSE production is only up 160 percent — and they are doing an estimated 80 percent of all new mortgage lending. By inference, MI providers have made huge gains in market share. ... the responsibility for tightening credit standards for home financings levered more than 4x has now been taken out of the hands of the GSEs, who are subject to terrific political scrutiny and pressure. That responsibility now sits squarely with private mortgage insurers, whose various state regulators are charged with ensuring the MI companies can pay claims — and not with putting a safety net under housing markets and household wealth.
Today, the WSJ discovers that mortgage insurers also have those wicked, evil things known as declining market policies:
... over the past few months, mortgage insurers have been declaring more and more of the U.S. a "declining market," raising the requirements and making such insurance harder to obtain. The result: another hurdle for home buyers, and yet another wrenching change for the struggling housing market.
Actually, that hurdle has been there all along, despite what the Journal writes, and it's precisely why Fannie and Freddie were more than willing to rescind their own policies when consumer groups cried foul over the practice. But those same consumer groups have apparently yet to figure out the role of mortgage insurers, since we've heard bupkus on the matter since then. With the issue now moving from HW to the WSJ, I'm pretty sure the debate over so-called declining market policies is about to land on the radar of consumer lobbyists -- my own experience is that orgs like the Center for Responsible Lending have never seen a prudent risk control measure enacted by the industry that couldn't be painted as harming consumers or discriminatory. And given the relevant track record on this issue, I'd guess that someone at a consumer group somewhere is already authoring a "report" that will get released this week or next.